Do You Stand Out Among Millennials?

REAL ESTATE TOPICS

By Courtney Soinski

As a real estate professional, it’s important to understand how to effectively target different groups of home shoppers. This is especially true among our younger “Millennial” generation, which comprises the largest share of home buyers at 31 percent, outnumbering baby boomers.

To sell to any audience, you have to understand it. Do you know how millennials think, act and purchase? This is the first step in engaging with prospects and winning new leads.

In a world filled with technology and instant gratification, how can real estate agents stand out while targeting and keeping the attention of millennials to win more leads and sell more homes?

Advertise your brand. Everywhere.

According to a joint study from The National Association of REALTORS® and Google, real estate consumers who use the internet while researching a home are more likely to use multiple sources.

52% of home buyers start their search online, but where else do they look? Everywhere. Millennials shop for homes in magazines, billboards, yard signs, direct mail, and the list goes on. Furthermore, REALTORS® using only offline marketing and sales channels should incorporate digital to adapt to these shopping behaviors.

In addition to advertising on your desktop and mobile website along with offline sources, new home buyers also place a strong emphasis on virtual tours and videos showcasing properties.

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Fish where the fish are.

Did you know that 77% of first-time home buyers drove by a home they viewed online? Take advantage of that statistic, both online and offline. Be in the places millennials are with the information they’re looking for, and then offer something of value with a strong call to action so you get their business.

Home buyers are more likely to bring their online research offline by walking through or driving by a home they viewed online. Imagine a yard sign in front of that house they’re driving by, which has a text code. Next thing you know, they’re on your mobile site and you have a new lead.

You’ll reach millennials in the real world when they see your magazine ad with a QR or text code that goes straight to your website, or when they receive a postcard with a lead generation code that gives you their phone number.

Keep the conversation going.

Millennials are deeply connected by technology, and let’s face it – they get distracted. Since this generation has such a short attention span, you want to be wherever they look. 36% of new home buyers do their shopping across multiple screens at the same time, so it’s no surprise they’re such multi-taskers.

Real estate agents must seize the opportunity to engage with millennials, the largest generation our society has seen.  Follow these tips to be prepared, connected, and ultimately, get more leads and sell more homes.

STATE OF AFFAIRS...THE HOUSING MARKET

REAL ESTATE TRENDS

After a slowdown during the spring, housing seemed to be making a comeback this summer. New Home Sales surged in August to an annualized rate of 504,000 units, up 18 percent over July. This was the first gain since May and the highest level since 2008. And the National Association of Home Builders reported that its Housing Market Index rose by four points in September to 59, its highest level since November 2005. The index measures home builder confidence in the newly built single home sector of the market, so this looked like a good sign for the housing industry. But other reports have disappointed, and economists have been worried about the erratic performance of the housing market. Housing Starts, measuring new residential construction, dropped 14.4 percent from July to August. Building Permits, which are a sign of future construction, declined nearly 6 percent, while Existing Home Sales fell nearly 2 percent (more about Existing Home Sales below). In other important news this fall, the Fed announced further tapering of its big Bond-purchase program. The Fed will now purchase $5 billion in Mortgage Bonds and $10 billion in Treasury securities each month, well below the $85 billion a month when the program first began. The Fed is expected to fully wind down the program at the end of October, and this is significant because home loan rates are tied to the performance of Mortgage Bonds. The question remains: Will the end of the program be a trick or a treat for Mortgage Bonds and home loan rates? Interested in becoming a Califorina Real Estate Agent? Click logo for more information. While the latest Existing Home Sales report showed signs of slippage, it could be great news for house hunters. What is the Existing Home Sales report? Reported monthly by the National Association of REALTORS®(NAR), the Existing Home Sales report is a measure of the selling rate of pre-owned single-family homes, which account for roughly 84 percent of all houses sold. What's happened recently? August Existing Home Sales declined by nearly 2 percent from July to an annual rate of 5.05 million units. Most economists were expecting sales to increase to 5.2 million units from July's reading of 5.14 million. This was the first decline in five months. What's the bottom line? According to NAR's Chief Economist Lawrence Yun, the decline was due in large part to the withdrawal of all-cash sales from investors. The silver lining is that first-time buyers now have a better chance of purchasing a home due to the corresponding reduction of bidding wars and supply constraints.

AUGUST HOME PRICES...

REAL ESTATE TRENDS

HOME PRICES INCREASE IN AUGUST
Nationwide, home prices, including distressed sales, increased 6.4 percent in August compared with a year ago, according to the August CoreLogic Home Price Index report. The change represents 30 months of consecutive year-over-year increases in home prices nationally. On a month-over-month basis, home prices nationwide, including distressed sales, increased 0.3 percent in August compared with July.

At the state level, including distressed sales, all states showed year-over-year home price appreciation in August.

Excluding distressed sales, home prices increased 5.9 percent nationally in August compared with the previous year and 0.3 percent month-over-month compared with July.

The CoreLogic HPI Forecast indicates that home prices, including distressed sales, are projected to increase 0.2 percent month over month from August 2014 to September 2014 and, on a year-over-year basis, by 5.2 percent from August 2014 to August 2015. Excluding distressed sales, home prices are expected to rise 0.2 percent month over month from August 2014 to September 2014 and 4.7 percent year over year from August 2014 to August 2015.

Including distressed sales, the five states with the highest home price appreciation were: Michigan, 11.1 percent; California, 9.2 percent; Nevada, 9.2 percent; Maine, 9 percent; and West Virgina, 8.7 percent.

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CALIFORINA HELPING FIRST-TIME BUYERS...

REAL ESTATE TOPICS

CALHFA INTRODUCES ADDITIONAL DOWN PAYMENT ASSISTANCE FOR FIRST-TIME HOME BUYERSThe California Housing Finance Agency recently announced that it will begin providing an additional $6,500 in down payment assistance through its CalPLUS Conventional program. The change is part of the Agency’s ongoing efforts to make home purchasing more accessible for first-time home buyers.  

 

CalHFA’s ZIP Extra down payment assistance program reduces the amount of money needed to close on the purchase of a home for buyers who may not yet have the funds for a large down payment, closing costs, or even an upfront mortgage insurance payment.

 

The new program, which launched Oct. 6, will include an additional $6,500 on top of the 3 percent down payment it currently offers as part of its CalPLUS Conventional with Zero Interest Program (ZIP). The ZIP program provides 3 percent of the loan amount at 0 percent interest on a fixed-rate, 30-year conventional mortgage. The additional $6,500, ZIP Extra, will also be provided at 0 percent interest.  

 

An added benefit is that a CalPLUS Conventional loan can also be combined with CalHFA’s other assistance programs, such as:

• The California Homebuyer’s Down Payment Assistance program


• The Extra Credit Teacher Home Purchase program


• The Mortgage Credit Certificate Tax Credit program

The new assistance is available only for first-time home buyers.
However, although non-first-time home buyers are not eligible for ZIP Extra, they may still benefit from CalHFA’s other first mortgage programs.

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HOUSING CONFIDENCE...

REAL ESTATE TOPICS

HOUSING CONFIDENCE BUOYED BY OPTIMISM AMONG MILLENNIALSOverall, Americans are more confident in the housing market than at the start of the year, buoyed by optimism among millennials but with tempered expectations in general for future market performance, according to the latest Zillow Housing Confidence Index (ZHCI). The ZHCI rose to 64.2 over the summer, up from 63.7 in January, and housing confidence increased among residents of 11 of the 20 major metro areas surveyed.

 

The ZHCI is measured on a 0 to 100 scale, with readings above 50 indicating positive sentiment. The Housing Market Conditions Index,
which measures prevailing market trends and buying/selling conditions, and the Homeownership Aspirations Index, which measures household homebuying plans and attitudes toward the social value of homeownership, rose to 62.1 and 62.7, respectively. The Housing Expectations Index, which measures expected changes in home values, home affordability, and the value of homeownership, fell to 66.1 from 66.3 in January.

 

The survey also revealed that younger renters are upbeat about their future homebuying prospects. Among millennial renters (aged 18-34), 82 percent said they were confident or somewhat confident that they will be able to afford to own a home someday, compared to 64 percent of Generation X renters (those aged 35-49), and just 48 percent of Baby Boomer renters (aged 50-64). Millennials overall were also far more optimistic about future home value appreciation. One-third of millennials (33 percent) said they expected home values to rise more than 6 percent per year over the next decade, compared to 21 percent of Generation X and just 15 percent of Baby Boomers.

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HOUSING SURVEY...

REAL ESTATE TRENDS

FANNIE MAE RELEASES SEPTEMBER HOUSING SURVEY RESULTSFollowing a recent dip in consumer housing optimism, most indicators have rebounded to the modestly positive trend seen throughout 2014, according to results from Fannie Mae's September 2014 National Housing Survey. Turbulent geo-political factors likely weighed on Americans' attitudes toward the housing market during the past couple of months. In September, the share of consumers who say now is a good time to buy a home rose to 68 percent, a four-percentage-point increase from August. Additionally, the share saying they would prefer to buy a home on their next move ticked up to 66 percent after a three-point drop in August. The results also show a notable jump in consumers’ views toward the economy, with 40 percent of those surveyed saying it is now on the right track – a five percentage point increase from last month. Interested in becoming a Califorina Real Estate Agent? Click logo for more information. Highlights from the survey include: The average 12-month home price change expectation rose to 2.2 percent. The share of respondents who say home prices will go up in the next 12 months rose to 45 percent. The share who say home prices will go down decreased to 8 percent. The share of respondents who say mortgage rates will go up in the next 12 months fell by five percentage points to 45 percent. Those who say it is a good time to buy a house rose to 68 percent. Those who say it is a good time to sell also increased—to 39 percent. The share of respondents who say the economy is on the right track jumped by five percentage points from last month to 40 percent. The percentage of respondents who expect their personal financial situation to get better over the next 12 months fell to 41 percent. The share of respondents who say their household income is significantly higher than it was 12 months ago increased by two percentage points to 25 percent.

REAL ESTATE TRENDS

By Amy Hoak

Replacing windows with more efficient ones doesn’t provide an immediate payoff for homeowners, from an energy-cost standpoint. Yet, come resale time, updated windows can be a plus.

That’s why one reader recently sent an email, explaining his dilemma:

“New windows would make no sense from an energy-saving payback (30-year payback at best), but I am starting to come around to the view that there are fewer and fewer DIY types in the market and that ‘green’ is an increasingly pertinent selling catch phrase, regardless of costs. But, then, if I do take the plunge — is it stupid to install the new windows 10 years before I move?” he wrote.

The short answer: It’s not a stupid idea, according to the contractors, real-estate agents and energy-efficiency experts to whom I posed this question. Still, it pays to pinpoint why you’re doing it.

Comfort and aesthetics

“Most people buy windows because their old ones are shot and drafty, and they know they’re losing energy,” said Paul Vosen, president of Degenhardt Home Improvement in Madison, Wis.

Some also swap windows for those that are easier to maintain or clean. Vinyl windows, for example, need less maintenance, and some windows can be cleaned from inside the house, Vosen said. New windows can reduce the amount of noise that can enter the home, as well as lessen the amount of ultraviolet light that comes in — which will reduce fading on flooring and furnishings, said Kathy Ziprik, spokeswoman for Simonton Windows, a manufacturer of windows and doors.

It’s not out the question for windows to last 30 years, if they’re taken care of, Vosen said. Buy them about a decade before you move (as the reader contemplated doing), and you’ll both enjoy them while you live in the home and still have windows new enough to appeal to an eventual buyer.

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Resale appeal

On a national average, you can recover 78.7% of the price of a midcost vinyl-window replacement and 76.6% of a more expensive vinyl-window replacement at resale, according to Remodeling magazine’s 2014 Cost vs. Value Report.Meanwhile, you can recover 79.3% of the cost of a midcost wood-window replacement and 74% of an upscale wood-window replacement at resale.

That potential return on investment is one reason John C. Kmiecik, a Chicago-area real-estate agent, recently spent $18,000 on new windows for his 3,000-square-foot suburban Chicago home. “We are probably going to stay in the house about five to seven years, and, when we do sell, we’ll be able to market that property with newer windows,” he said.

Most buyers see new windows as a big perk. In fact, Kmiecik has seen some buyers decide against buying certain homes because the windows were old and needed to be replaced soon — an investment that would easily cost them in the five-figure range, he said. New windows also add curb appeal.

Can you afford to buy a fixer-upper?

REAL ESTATE TOPICS

Many homebuyers are drawn to the lure of the fixer-upper. And with good reason, at least on paper.

But the “buy low, sell high” ethos of fixer-uppers isn’t exactly a guarantee. There are plenty of people who snagged the worst house in a great neighborhood and turned it into their dream home. You’re just as likely to find overworked and overspent homeowners ready to run from their money pits.

Committing to a fixer-upper is a big decision, one that can impact your financial picture for years to come. Before you start swinging a hammer, you’ll first need to find a way to finance your purchase.

You may need a specialized mortgage product to buy a fixer-upper. Some lenders and loan types want properties in “move-in ready” condition, which can obviously pose a problem.

Here are a few options to consider.

FHA 203k

The Federal Housing Administration offers a government-backed rehab loan that allows buyers to finance renovations based on the property’s projected value. There are two distinct types of 203k loans: a streamline version and the standard.

Buyers using the streamline option can add up to $35,000 to their loan to make non-structural repairs, like new carpet, paint or even a kitchen remodel. The standard 203k loan gives borrowers more leeway in terms of how much they can borrow and how they can use the money.

Repairs must be completed within six months. Homebuyers can also finance up to six months’ worth of mortgage payments, a bonus that can help cover costs if you need to live elsewhere during the renovation.

The FHA 203k loan program can be a great fit for low- and middle-income borrowers. Credit and down payment benchmarks (3.5%) are lower for FHA loans. But there are also some downsides. FHA loans carry costly mortgage insurance and limit borrowers in most parts of the country to a max loan of $271,050.

Fannie Mae HomeStyle

These rehab loans also let qualified buyers finance remodeling costs, based on the “as completed” worth of the home.

Unlike with 203k loans, borrowers can use Fannie Mae’s HomeStyle program to make “luxury” improvements like pools and landscaping. The only caveat with repairs is that they’re permanent and increase the property’s value.

Getting one of these loans can be a bit tougher. Conventional loans usually require higher credit scores and at least 5% down. But your borrowing reach can extend because these loans are linked to the conforming loan limit, which is currently $417,000 in most places.

Buyers who plan to live in the home can do some of the renovation work themselves, as long as financing for the DIY portions doesn’t exceed 10% of the home’s projected value.

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Conventional Renovation Loans

Some conventional lenders offer rehab loans outside of these two programs. Rules and requirements will vary. As with any type of home loan, it pays to shop around.

Some lenders won’t allow you to do any of the work yourself. Others will require you to have several months’ worth of mortgage payments in reserve.

Knowing what shape your credit is in before you begin the mortgage process can help you determine which loan option will work best for you. That means pulling your credit reports to look for errors or other issues that need to be addressed, along with your credit scores to see where you stand in general. You can get your credit reports for free once a year from each of the three major credit reporting agencies, and you can use a free service like Credit.com to see your credit scores.

What You Can’t Afford

Regardless of the financing path you choose, make sure you pay for a professional home inspection along with the home’s appraisal. Home inspections are important even when you’re buying a nearly new home that’s move-in ready.

They’re critical when you’re considering a property that needs work. You can retrace the inspector’s steps later with a contractor to get a good sense of what it’ll cost to resolve any problems.

This Mortgage Cost Is No Longer Necessary

REAL ESTATE TOPICS

For those who’ve gotten a mortgage in the past few years with little equity, most are all too familiar with private mortgage insurance, the added premium built into the mortgage payment insuring the lender against payment default. Measured over time, it can cost you thousands, so it’s worth a closer look — especially if you can eliminate it entirely.

There Are No Longer Tax Advantages

For years, mortgage borrowers got to enjoy additional tax advantages by having the ability to write off their annual mortgage insurance premiums — much like their property taxes and mortgage interest. A dollar-for-dollar write-off, paying PMI wasn’t all that bad. From 2008 through 2013, it was simply the cost of doing business if you didn’t havethe holy grail 20% down payment. Then the IRS changed the rules, and disallowed the mortgage insurance premium deduction for taxable years after Dec. 31, 2013. As we enter Q4 2014, many homeowners are not privy to this change, and will learn that their PMI is now an after-tax expense (like fire insurance or a consumer loan payment).

It Reduces Your Borrowing Ability

If your mortgage payment has PMI built in, by definition you have more debt, requiring more income to offset it. Without more income, the PMI erodes the existing income normally used to offset the rest of the mortgage payment and other obligations (like car payment, student loans, credit cards, etc). The exact amount of the PMI is how much your gross income is reduced by — without the tax advantage. For example, a $250 per month PMI reduces your income by $250 per month.

Home Equity Needed

Here’s the thing: You don’t need to have 20% equity anymore to get rid of PMI. If an appraisal of the property you’re going to buy shows you have 10% equity, you could qualify for the lender to pick up the monthly mortgage insurance payments, aptly called Lender Paid Mortgage Insurance. (This can also be done if you’ve already purchased the home and want to eliminate PMI from your monthly payment.) This is especially advantageous as PMI can be anywhere from .75% of the loan amount to 1.3% of the loan amount, annually, paid on a monthly basis. On a loan for $400,000 that could be as high as $430 per month, which is an immense net tangible benefit if the lender scoops up this premium each month.

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However, you need an appraisal to see if you qualify for this. Most lenders’ appraisal fee is $400-$500, but it’s worth it if you can get a substantially lower mortgage payment without the PMI. On the flip side, the appraisal may also determine that you have insufficient equity to qualify, but it will help you define exactly how much more value you would need to refinance in the future.

PMI Slows Your Mortgage Payoff Timeline

This is a big disadvantage of PMI. Let’s say your mortgage payment is $2,800 per month, and $300 of it is the PMI payment. You’re investing an extra $200 per month into your principal balance to reduce the interest you pay on the mortgage over time — as a smart consumer, you’re making a $3,000 per month mortgage payment. If you didn’t have the PMI, you would be paying an extra $500 per month directly to your principal, compounding your timely prepay efforts and reducing your interest expense exponentially. If you’re overpaying on your mortgage and you have PMI, you’re only realizing half the potential you would be if you were able to get rid of the PMI or shift the cost of the PMI to the lender via lender paid mortgage insurance.

How to Cut PMI If You’re Refinancing

Some homeowners have a mortgage they took out when 30-year mortgage rates were below 3.75%. In this case, why refinance a mortgage if you have a 3.25% 30-year fixed with PMI and a new 30-year fixed rate mortgage is just over 4%? Well, petitioning out with PMI is daunting task indeed, especially depending the type of loan you have.

If you have an FHA mortgage you took out pre-June 2014: The requirement then was after 60 months of mortgage insurance premiums paid to HUD and 20% equity, you had the ability to petition out of PMI — and it is up to the lender’s sole discretion to grant the homeowner’s request, not a guarantee. Alternatively, the PMI would be removed at 78% loan-to-value / 22% equity based on an amortization schedule from the original loan inception, calculating out at 120 months (that’s 10 years).

However, PMI for FHA loans originated after June 2014 with 3.5% down contains permanent mortgage insurance, and the only way out is to refinance or with 10% down. You can petition out of the mortgage insurance after 10 years. However, refinancing may be a more worthwhile choice in either situation.

For conventional loans, you can petition to remove it after a minimum of 24 months of mortgage payments. The key here is: If refinancing into a conventional loan with lender paid mortgage insurance is less costly than how much more you would pay in PMI between now and when 24 months is up, moving out of the PMI would make sense as long as the rate is the same, or lower.

*Mortgage Tip: If the interest rate on a new refinance is .125 %to .25% higher than the current rate with PMI, the rate differential could make financial sense if prepaying the mortgage.

Borrowers might just have more equity than they think. In many markets, home prices have not only stabilized, but have risen, creating more equity for homeowners who otherwise were thinly financed in years past. This additional equity can easily pave the path to reducing the PMI payment, if not completely removing it.

The Bottom Line

You can avoid PMI if you have as little as 10% down payment or home equity. Work closely with your loan officer, they are incentivized to help you. If you can’t avoid mortgage insurance, depending on your financial situation, ask your lender what other adjustments can be made to reduce your mortgage costs: credit score, loan program and of course equity all play important roles in your loan structure. You can check your credit scores for free every month on Credit.co

Investors still like rentals: Where are they buying?

REAL ESTATE TOPICS

By Diana Olick

With home prices still rising and fewer distressed properties coming to market, some claim the single-family rental trade is over. Investors will hold the homes they have and securitize the assets in order to leverage their investments, but they won't buy any more.

"There is very little institutional buying at the present time, as prices have increased to the point where the returns on new investment are insufficient," wrote Laurie Goodman of the Urban Institute in a recent report. She even went so far as to predict a $20 billion cap on the single-family rental securitization market.

Laurie Hawkes, president and COO of Scottsdale, Arizona-based American Residential Properties, a single-family rental REIT with roughly 9,000 homes, firmly disagrees.

KentWeakley | Getty Images

"The buying is not over," said Hawkes. "The math may not work in markets such as Arizona and California, but it's no different than any other asset class where some heat up faster than others and then you move on."

American Residential may not be buying in Phoenix anymore, but it is spending about $100 million per quarter (roughly 800 homes) in markets like Charlotte, North Carolina, and Nashville, Tennessee

"We see far more opportunity to buy than we have capital," added Hawkes.

One thing that all agree upon is that smaller and individual investors are increasingly entering the single-family market. While rental returns are falling slightly for properties purchased today, due to higher home prices, they are still well in the positive.

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"The single-family rental market is still strong, with returns averaging 9 percent in the 586 counties analyzed," said Daren Blomquist, vice president at RealtyTrac. "Even so, the market is softening, with those same 586 counties averaging a nearly 10 percent return a year ago."

As with everything in real estate, the single-family rental trade is local. Some higher-risk markets, where unemployment and vacancy rates are elevated, offer rental returns as high as 19 percent; other pricier markets offer low single-digit returns.

RealtyTrac found markets in North Carolina and Georgia offered some of the highest rental returns, while markets in the New York/New Jersey area, as well as San Francisco, offered the lowest. Some of the "safest" markets for rental investors, where unemployment and vacancies are below average, were in Springfield, Ohio, Miami and Tulsa, Oklahoma.